Malaysian-listed utility company, Ranhill Holdings Berhad’s share price did not perform well since its IPO. It has fallen from its IPO price of RM1.20 per share to RM0.825 (closing as of 3 May 2017). Thus far, it had paid 3 interim dividends and shall be paying another final dividend in the month of June 2017. Given its reasonable amount of dividend payments, would this warrant a re-rating of its stock price?
Dividend payments for the trailing 12 months / next 2 months:
- Div payment date 28 Sep 2016: 1.8 cent per share (interim dividend)
- Div payment date 19 Jan 2017: 2.0 cent per share (interim dividend)
- Div payment date 29 Mar 2017: 2.0 cent per share (interim dividend)
- Div payment date 16 Jun 2017: 2.0 cent per share (final dividend)
Total dividend paid / to-be-paid = 7.8 cents per share (implied dividend yield of 9.45%, based on closing price as of 3 May 2017 of RM0.825 per share). Ranhill’s implied dividend yield is pretty decent for a utility company if you compare it to other Malaysian-listed utility companies (e.g Tenaga, Malakoff and YTP Power):
Potential re-rating in share price: Assuming investors require a dividend yield of 6.6% (based on YTL Power’s current dividend yield) and Ranhill is also able to maintain at least RM0.078 annual dividend payment, we may be looking at indicative target price of RM1.18 per share.
The main question is whether Ranhill is able to maintain its dividend payout, given the fact that it had recently divested part of its equity stake in China water treatment assets. If things do not go according to plan, one may consider a possible stop loss at RM0.795 for this particular stock.
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